21 May 2009

Rt Hon James Purnell MP

Secretary of State for Work and Pensions

Welfare 2020

RSA London

Thursday 21 May 2009

[Check against delivery]

The economic crisis has required swift action to rescue the banks, maintain confidence and protect people from the worst. The Prime Minister and Chancellor deserve credit for the boldest, quickest and most comprehensive response of any industrialised country.

But what follows is up for grabs. Already the debate has turned to who has the right ideas and vision to build a better country.

Our goal should be to return the budget to balance by ensuring we come out of recession as quickly as possible, and then grow as quickly as reasonable.  And this time, the rewards from growth should be shared as widely as possible.

The welfare state is centre stage in this economic drama. But it is a stage with human players – and our policies must start and end with their lives and their needs.

In my view the purpose of the welfare state is to spread power. It goes beyond self interest. We don’t contribute to the welfare state just because we hope to benefit – we contribute because we have obligations to each other.

The Government’s objectives for the welfare state will always remain the same: more people in work and fewer in poverty. People in control of their lives. A fairer and more equal society.

But despite the progress we’ve made, we know that injustices remain and that aspirations go unrealised. So in the years ahead we need not just an active, but a proactive welfare state.

This means not just more of the same, but new reforms to complete the transformation of a system that’s there to change people’s lives.

The lessons of the credit crunch point to the themes for the next phase of reform. At root, the credit crunch was a power failure. Economic power became too concentrated and unaccountable. Too much power in the City, too little in the regulators.

And when economic waters get choppy, those with power are more able to cope than those without. Recession underscores the inequality in people’s resilience, in their options when times get tough.

There is a power deficit in our society and the role of the welfare state is to close it. There are still too many people who don’t have a fair chance because the odds are stacked against them, whose freedom to choose and to act are narrow and constrained:

• the person desperate to work for whom a suitable job is not available
• the disabled person who would love to work but doesn’t think they can or is held back by the attitudes of those around them
• The person who made a bad decision – getting into trouble with the law – but who is desperate for a second chance.

These are the people who need the power of the welfare state. Because while the genius of a market economy is to generate limitless opportunities, it’s fundamental flaw is to multiply and magnify the rewards of the powerful at the expense of the powerless.

The goal of this government has always been to re-balance this equation. And the welfare state is in the vanguard of that mission:

• protecting people in the face of insecurity, so they have the confidence to take risks
• building people’s capabilities, so they control what they can do and be
• maintaining public confidence in and consent for a fair and generous system.

While there are people with the desire and the will to work, but who are denied that chance because they haven’t the skills or they can’t find the childcare or no employer will take them on, then we are yet to ensure the right to work.

And while there are still those who don’t look for work seriously, we have not yet entrenched the responsibilities on which the system rests.  

Our goal is a society of powerful people with the capabilities to be masters of their lives. And this requires power, wealth and opportunity to be more fairly and justly distributed.

So, to achieve this goal, what should the progressive welfare state look like and do by 2020?

It should eradicate child poverty. It should provide more generous support for people during transitions in their lives – job loss, early parenthood, caring and poor health. But that support should be temporary for the vast majority – not a way of life.

Virtually everyone on benefits should be on an active journey back towards work, with support and conditions tailored to their individual circumstances.

And no one with the desire and the motivation to work should be denied that opportunity. We should do everything to stop unemployment becoming long term, because that’s when people give up hope.

I want to see a welfare state where in return for opportunities that are meaningful and power that is real, people have the duty to take advantage of those opportunities. If they choose not to, society’s obligations to them should reduce.

Social justice requires such an explicitly conditional welfare state. Firstly because we know that conditionality works, in helping people to turn around their lives. And secondly because it is the foundation for the public support on which the welfare state is based.

So what more do we need to do next? First, deliver our plan to get people back in to work. Second, complete welfare reform.

Unemployment – the power of work

Over the last few months, we have put in place the most comprehensive plan to support people facing unemployment of any UK government – from the moment they lose their jobs until the time they find their next one.

Our objectives are to support people back to work as quickly as possible and to ensure the consequence of this recession is not the return of mass long term unemployment – we are learning the lessons of the past.

Unlike previous recessions, the latest figures show that the number of people claiming out-of-work benefits actually fell by 40,000 in the year to November.  It’s too early to claim success, but we are doing everything to make sure this is a different, fairer recession, where no one gets left behind.

In the last 4 months, a million people have gone back in to work and half of new claimants leave benefits within three months. For people who haven’t found a job in 6 months, there is now extra help through recruitment incentives, the chance to start a business or develop a new skill.

This has not all happened by accident. It has happened because we have invested an extra £3 billion in Jobcentre Plus and our providers since the PBR.

And we have invested a further £1.2 billion to guarantee work or training to every young person at risk of long term unemployment. As part of this, the Future Jobs Fund is already taking bids to create jobs of value to the community up and down the country.

This guarantee is rooted both in our belief in the power and dignity of work and in our understanding that long term unemployment is demoralising and debilitating. Valuable activity is far better for people than doing nothing. The guarantee aims to give young people a sense of purpose – and show that society has a stake in them too.

This is our collective duty – to give the power of work or the opportunity of learning to those who would otherwise miss out.

This is a departure for this government. Since 1997, we have relied on supply side measures, building an active welfare state, supporting people to take up opportunities to work.

In contrast, this is a demand side measure, to provide opportunities for people to work whilst the economy is in recession.

In return for this more ambitious approach, I believe expectations of individuals should be more stretching too. So as our guarantee gets up and running, I think we should consider whether young people are required to take the offer up – so that none get left behind in this recession.

Any Jobcentre Plus adviser will tell you about claimants who are desperate to work but go through interview after interview without luck. Low qualifications may stand in their way. Or perhaps a past blighted by crime or substance abuse has cast a shadow on their future. By guaranteeing them work or training, we can give them the chance to show they can do the job.

But those same advisers will also point to a minority of people whose efforts to find work are token. They may be working and claiming. Or they may have no intention of working.

If there was an obligation to take up work or training, this would call their bluff.

This principle would draw on the experience of the Dutch and Danish welfare systems, where employment is higher and poverty lower than in the UK. It makes the welfare state more empowering and more demanding. And it would point towards the kind of system we aspire to over the coming decade.

Next phase of reform – Welfare 2020

This would be a bold approach to unemployment. But we will also press ahead with putting our Welfare Reform Bill into law, investing in and implementing our existing plans.

Even then, we’ll need to go further if we are to shape a truly progressive and empowering welfare state. I want to set out today the four goals around which the government’s next phase of reform will be built:

First – virtually everyone on benefits should be on an active journey back to work, with support and conditions that are tailored to their individual circumstances.

We will implement the vision set out by Paul Gregg in his review for the Department. We won’t require disabled people or parents of young children to take work immediately.

But we will expect them to take steps to prepare for work – because no-one should be consigned to a life on benefits.

People will get support based on their personal needs not the benefit they claim.

They will get help from world class personal advisers. We’ll use the best of the public, private and voluntary sectors – and pay by results. A claimant’s charter will put power in people’s hands.

Second – no-one with the desire and the will to work should be denied that opportunity – requiring positive action and smart investments to ensure people have the power to work.

If our guarantee of a job or training for young people works we should learn the lessons from this approach. This could mean offering a job to people who had not found work themselves after a sustained period on JSA, and potentially requiring them to take it up. This would truly be a revolution in welfare. More supportive, more demanding.

We also need to be more proactive to make sure disabled people have an equal opportunity to work.

This is especially the case for those with mental health conditions, where the employment rate is shameful – as low as 10 percent compared to 73 percent on average for the rest of the population. Yet up to 90 percent of people with even severe mental health conditions consistently say they would like to do some paid work.

The system is failing too many people with mental health needs. But this isn’t one of those problems without a solution. In the South West London and St. George’s Mental Health Trust for example they are following the Individual Placement and Support approach – which successfully gets over half of people with severe conditions into work.

This is about moving away from the traditional model of training and interviewing people for work, to a new regime based on placing and supporting them in work. People with mental health conditions often find it difficult to get jobs through traditional interview routes. Even employers with the best intentions often don’t know how to adapt for these applicants.

Instead, the placement and support approach helps people to find work as soon as they wish to do so and then helps them to succeed in that job.

This can involve a subsidy to the employer, or funding for a personal adviser, or providing something as basic as a telephone number for the employer to call for advice.

With the right support, better designed, within a system that helps people overcome mental health conditions rather than stigmatises them, we can change lives.

And we can do more for people with mild to moderate mental health conditions too.  By expanding access to talking therapies we can offer people rapid access to treatment. We are introducing a new network of mental health co-ordinators in our Jobcentres to help people into work rather than leaving them on benefits – which in itself can make them more depressed and more anxious.

So, we should be aiming to reform the way benefits, employment and health services interact. I want better access to treatment for people with less severe conditions, and much more intensive, integrated support for those with severe ones.

There is a solution here, and I’ve asked Rachel Perkins, from the Mental Health trust that has pioneered one successful new approach here to lead a review to recommend how we can make the best use of all the tools available.

She will report by the Pre Budget Report, so we can move quickly to ensure the system and the money we spend capitalises on the much better treatment that is now available

Our third goal for a 2020 welfare state is a benefits system which offers a clear and substantial reward to work – on the way to ending the injustice of in-work poverty. So that people who work hard get a fair reward.

We have got rid of the outrageous unemployment traps which existed in the system before 1997, so that people are better off in work. We now need to make sure that there is always a stronger incentive for people to get a job and earn more.

The benefits system should be easier for people to understand and navigate – so they trust it and are empowered to take the leap off benefits and into work.

It should also be fair to those who've paid in and those who need extra help – within a system that is affordable as Britain gets back to work.

Finally, our fourth goal is that, over time, as our reforms take effect and employment grows, we should aim to switch spending from the costs of unemployment to investments in the future.

One of our key priorities should be universal, affordable and high quality childcare – which helps to equalise children’s life chances and gives parents the power to make choices about work and family life.

Universal childcare is the foundation of the Scandinavian welfare systems which progressives in the UK rightly aspire to.

In these countries support is both more generous and more conditional, where investment in people is the route to higher employment and lower child poverty.

And it is the route map for our 2020 welfare vision.

Conclusion

The old debate about the welfare state was between those who argued for an active system and those who opposed conditionality.

The debate for the future will be whether we want simply an active welfare state that requires responsibility from claimants without also offering support, or whether we want a proactive welfare state which matches those responsibilities to real power and opportunities.

An active welfare system alone simply requires people to work.

A proactive Welfare State seeks to create those jobs and opportunities.

It is based on supportive conditionality and it requires up front investment.

Done right, this could speed up recovery by getting people back in to work more quickly. It could reduce the costs of the recession. And it can eradicate child poverty.

We can only come out of the current turmoil by being more confident and more radical about our goal of shaping a fairer and more equal society, where everyone has the power and capabilities to live the life they seek.

This next stage of welfare reform both embodies that radical vision and helps create the resources to create it.